Nasdaq
华尔街日报Returns At EMSTEEL Building Materials PJSC (ADX:EMSTEEL) Are On The Way Up
What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at EMSTEEL Building Materials PJSC (ADX:EMSTEEL) and its trend of ROCE, we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for EMSTEEL Building Materials PJSC, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.046 = د.إ440m ÷ (د.إ11b - د.إ1.6b) (Based on the trailing twelve months to September 2025).
Therefore, EMSTEEL Building Materials PJSC has an ROCE of 4.6%. In absolute terms, that's a low return but it's around the Basic Materials industry average of 4.4%.
Check out our latest analysis for EMSTEEL Building Materials PJSC
Historical performance is a great place to start when researching a stock so above you can see the gauge for EMSTEEL Building Materials PJSC's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of EMSTEEL Building Materials PJSC.
What The Trend Of ROCE Can Tell Us
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.6%. The amount of capital employed has increased too, by 378%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 14%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.
The Bottom Line
All in all, it's terrific to see that EMSTEEL Building Materials PJSC is reaping the rewards from prior investments and is growing its capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 27% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
EMSTEEL Building Materials PJSC does have some risks though, and we've spotted 1 warning sign for EMSTEEL Building Materials PJSC that you might be interested in.
While EMSTEEL Building Materials PJSC may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.